This new tax has placed a great burden on our seniors, many of whom live on fixed incomes.
Last year, Gov. Rick Snyder and the Republican-controlled Legislature extended the state’s 4.35 percent personal income tax to private and public pensions.
The tax on pensions took effect in January and is expected to raise about $344 million in fiscal year 2013.
Taxpayers born before 1946 can exempt $47,309 in pension income for single filers and $94,618 for joint filers from the tax.
Those born between 1946 and 1952 get exemptions of $20,000 for single filers and $40,000 for joint filers. Pension income of those born after 1952 is fully taxed.
Social Security income for all retiree age groups is exempt from the state income tax.
The new tax on pensions was opposed by all of the Democrats in the Legislature, some Republicans and the AARP, a lobbying group that represents people 50 years and older.
Whitmer didn’t offer any evidence in her floor speech that the tax has “placed a great burden on our seniors.” AARP and the Michigan League for Human Services, which advocates for low-income residents, also could not quantify how many seniors may be suffering financially because of the tax.
Most retirees who are at least 67 years old likely are not paying the tax because of the high deduction level. Plus, Social Security is not taxed.
QUESTIONABLE STATEMENT: Your new pension tax on seniors is forcing many to choose between medication and groceries.
This statement was aimed by Whitmer at Republicans who voted to implement the pension tax last year. Once again, she didn’t offer any evidence that the tax is forcing seniors to “choose between medication and groceries.”
A study by Washington, D.C.,-based Wider Opportunities for Women, based on 2010 data, found that seniors in Michigan fared better than most in meeting basic living expenses.
While the study found that median incomes for those older than 65 fell short of meeting basic expenses in every state, Michigan tied with Idaho as third-best in the country, behind Alaska and Montana, respectively.
And it would stand to reason that those most likely to be choosing between paying for medication or groceries are those living on Social Security income without any pension supplement.
QUESTIONABLE STATEMENT: The tax on seniors is overly burdensome on our seniors and is now producing a drag on our economy as seniors’ incomes have become diminished.
Again, Whitmer offers no data to support this claim. And it’s really too early to tell what impact the pension tax might have on the state’s personal income this year because it just took effect in January.
QUESTIONABLE STATEMENT: This is one of the largest tax increases in Michigan’s history and it was placed on those who can least afford it.
Whitmer probably is correct in saying the pension tax is “one of the largest tax increases” in the state’s history. But ranking the size of tax increases is tricky because of the impact of inflation and other factors, said Craig Thiel, director of state affairs at the Citizens Research Council of Michigan.
Thiel said the largest tax increase in Michigan’s recent history likely was in 1982, when the state income tax was temporarily boosted from 4.6 percent to 6.35 percent to resolve a budget crisis.
Whitmer’s short floor speech was in support of a bill amendment offered by Sen. Bert Johnson, D-Highland Park, which sought to eliminate the pension tax. Johnson tried to amend Senate Bill 1104, which addressed changes in withholding requirements for certain gift annuities. The amendment failed.
The pension tax is unpopular in Michigan, a state where 25 percent of the population is 55 years and older. Democrats are likely to use the tax as a major issue against Republicans in this year’s election campaign.
Whitmer made numerous claims about how the tax is hurting seniors, but offered no data, or even anecdotal evidence to back up her claims.
Her speech also lumped the entire senior population into one category: struggling to make ends meet. While many may be, most seniors who are past the typical retirement age of 65 are not even subject to the tax.
Truth Squad call: Foul for not backing up claims that the pension tax has placed “a great burden” on seniors.